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19 Jun 1212 Employment termination payments tax offset

The ATO advises that as part of the 2012-13 Budget, the government announced it is revising the way that employment termination payments (ETPs) are taxed.

From 1 July 2012 there will be an additional $180,000 non-indexed whole of income cap based on an individual's yearly taxable income that will work in addition to the existing ETP cap rules on some employment termination payments.

An individual will receive an ETP cap, being the lesser of either:

  • the existing lifetime benefit ETP cap ($175,000 in 2012-13)
  • the $180,000 'whole of income' cap', reduced by other taxable income.

The $180,000 will be reduced by other taxable income (excluding the employment termination payment in question) that the individual may receive in that income year.

The $180,000 whole of income cap will not apply to:

  • genuine redundancy payments
  • early retirement scheme payments
  • invalidity payments
  • compensation received due to a genuine employment related dispute relating to personal injury, harassment, discrimination or unfair dismissal
  • death benefit payments.


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